Scrutiny of Bills Alert Digest No. 18 of 1999


Scrutiny of Bills Alert Digest No. 18 of 1999

24 November 1999

ISSN 1329-668X

Members of the Committee

Senator B Cooney (Chairman)

Senator W Crane (Deputy Chairman)

Senator T Crossin

Senator J Ferris

Senator B Mason

Senator A Murray

Terms of Reference

Extract from Standing Order 24

(1)

    (a) At the commencement of each parliament, a Standing Committee for the Scrutiny of Bills shall be appointed to report, in respect of the clauses of bills introduced into the Senate, and in respect of Acts of the Parliament, whether such bills or Acts, by express words or otherwise:

      (i) trespass unduly on personal rights and liberties;

      (ii) make rights, liberties or obligations unduly dependent upon insufficiently defined administrative powers;

      (iii) make rights, liberties or obligations unduly dependent upon non-reviewable decisions;

      (iv) inappropriately delegate legislative powers; or

      (v) insufficiently subject the exercise of legislative power to parliamentary scrutiny.

    (b) The committee, for the purpose of reporting upon the clauses of a bill when the bill has been introduced into the Senate, may consider any proposed law or other document or information available to it, notwithstanding that such proposed law, document or information has not been presented to the Senate.

TABLE OF CONTENTS

A New Tax System (Indirect Tax and Consequential Amendments) Bill (No. 2) 1999
Customs Amendment (Anti-Radioactive Waste Storage Dump) 1999
Customs Tariff Amendment (Tradex) Bill 1999 [No. 2]
Defence (Re-establishment) Amendment Bill 1999
New Business Tax System (Capital Allowances) Bill 1999
New Business Tax System (Former Subsidiary Tax Imposition) Bill 1999
New Business Tax System (Income Tax Rates) Bill (No. 1) 1999
New Business Tax System (Integrity and Other Measures) Bill 1999

A New Tax System (Indirect Tax and Consequential Amendments) Bill (No. 2) 1999

This bill was introduced into the House of Representatives on 21 October 1999 by the Parliamentary Secretary to the Minister for Finance and Administration. [Portfolio responsibility: Treasury]

The bill proposes to amend the following Acts:

A New Tax System (Goods and Services Tax) Act 1999, the A New Tax System (Luxury Car Tax) Act 1999 and the A New Tax System (Wine Equalisation Tax) Act 1999 to:

  • make a minor technical amendment in relation to GST-free supplies;
  • ensure that payments made to local government bodies that are specifically covered by an appropriation are not subject to GST;
  • ensure the obligation to issue an adjustment note arises only if a tax invoice has been issued or requested in relation to the supply that is the subject of the adjustment;
  • ensure that a member exiting a GST group will become responsible for adjustments relating to transactions made to entities outside the group during the time the entity was a member of the GST group and that the group's representative member will not be responsible for these adjustments;
  • amend the provisions relating to second-hand goods;
  • ensure that certain telecommunications services that are used or enjoyed in Australia, are subject to GST;
  • provide consistency with other provisions in the GST Act in relation to the transport component of the value of a taxable importation for goods that were exported from Australia for repair or renovation;
  • permit, but not require, a government entity to register for GST and allow registered government entities to group with other registered government entities;
  • clarify that the adjustment period when disposal, loss or destruction occurs in the same year as that in which the acquisition or importation is made is the period ending 30 June in that year; and
  • ensure that certain applications to one's own use of wine are not taxable;

A New Tax System (Goods and Services Tax) Act 1999 and the A New Tax System (Goods and Services Tax Transition) Act 1999 to:

  • ensure that State stamp duties on insurance premiums are not subject to GST;
  • allow prescribed statutory compensation schemes to be brought within the operation of Division 78;
  • allow certain government insurance schemes to be excluded from Division 78 through regulation;
  • amend the workers' compensation and CTP insurance provisions to reduce compliance costs that would otherwise arise; and
  • deny input tax credits on premiums paid for CTP insurance that ensure no GST is payable on any related settlements, for the first 3 years of the GST;

A New Tax System (Goods and Services Tax Transition) Act 1999 to:

  • ensure that long term leases entered into between 2 December 1998 and 1 July 2000 are not subject to GST;
  • ensure that the provisions relating to rights granted for life between 2 December 1998 and 1 July 2000 operate as intended;
  • apply a special credit for certain alcoholic beverages held at 1 July 2000 that are not covered by the WET; and
  • allow for a credit for certain petroleum products held at 1 July 2000;

A New Tax System (Commonwealth-State Financial Arrangements) Act 1999 to ensure that the calculation of GST revenue to be distributed to the States and Territories will include any general interest charge relating to GST and to ensure that any effect that the WET and LCT laws may have on GST revenue will not be included in the calculation;

A New Tax System (Australian Business Number) Act 1999 to ensure that overseas businesses that are required to register for GST purposes are able to obtain an ABN;

Consular Privileges and Immunities Act 1972, the Diplomatic Privileges and Immunities Act 1967, the International Organisations (Privileges and Immunities) Act 1963 and the Overseas Missions (Privileges and Immunities) Act 1995 to:

  • ensure that Australia continues to meet its obligations in respect of taxation concessions for goods imported by diplomatic missions, consular posts, overseas missions, international organisations and their officials;
  • provide for an indirect tax concession scheme for these bodies to allow Australia to provide taxation concessions for local purchases on a reciprocal basis; and
  • make it clear that international organisations in Australia will not be able to register for GST purposes;

and makes consequential amendments to two Acts.

The Committee has no comment on this bill.

Customs Amendment (Anti-Radioactive Waste Storage Dump) Bill 1999

This bill was introduced into the Senate on 20 October 1999 by Senator Brown as a Private Senator's bill.

The bill proposes to amend the Customs Act 1901 to prohibit the importation of nuclear waste for disposal in Australia.

The Committee has no comment on this bill.

Customs Tariff Amendment (Tradex) Bill 1999 [No. 2]

This bill was introduced into the House of Representatives on 21 October 1999 by the Parliamentary Secretary to the Minister for Industry, Science and Resources. [Portfolio responsibility: Justice and Customs]

One of a package of five bills to implement the Tradex Scheme, this bill proposes to amend the Customs Tariff Act 1995 to allow the importation, without the payment of customs duty, of goods included in a tradex order, where those goods are imported by the holder of the order.

The Committee has no comment on this bill.

Defence (Re-establishment) Amendment Bill 1999

This bill was introduced into the House of Representatives on 18 October 1999 by Mr Beazley as a Private Member's bill.

The bill proposes to amend the Defence (Re-establishment) Act 1965 to:

  • establish an Office of Reserve Forces with a range of specified functions;
  • clarify coverage for Australian Defence Force overseas peace-enforcement, peacekeeping and humanitarian relief operations;
  • increase penalties;
  • clarify procedures for members and a member's employer; and
  • prohibit an employer from taking adverse action against a person who acts to enforce a protection afforded to them under the Act.

The Committee has no comment on this bill.

New Business Tax System (Capital Allowances) Bill 1999

This bill was introduced into the House of Representatives on 21 October 1999 by the Treasurer. [Portfolio responsibility: Treasury]

One of a package of bills to implement the New Business Tax System, this bill proposes to amend the following Acts:

Income Tax Assessment Act 1997 to:

  • remove plant and equipment from the CGT regime;
  • include in assessable income the excess of disposal proceeds over the cost base of the plant or equipment, indexed to 30 September 1999;
  • remove the balancing charge offset for disposals of plant, other than for small business taxpayers;
  • provide for a balancing charge offset for involuntary disposals of plant to replace the current CGT roll-over relief for such disposals;
  • to provide a test to determine who is a small business taxpayer for the purposes of working out eligibility for accelerated depreciation, balancing adjustment offsets and immediate deductions for particular advance business expenditure;
  • allow depreciation deductions for the cost of an indefeasible right to use capacity in an international telecommunications submarine cable system (IRU) over the effective life of the submarine cable;
  • treat the granting of an IRU as a disposal by the grantor of an ownership interest;
  • provide for rules allowing taxpayers, other than small business taxpayers, to re-estimate the effective life of plant where market, technological or other factors associated with the use of the plant have impacted on the previous estimate of effective life; and
  • make a consequential amendment; and

Income Tax Assessment Act 1997 and the Income Tax Assessment Act 1936 to:

  • remove accelerated depreciation of plant and equipment, other than for small business taxpayers satisfying certain conditions; and
  • where accelerated depreciation is removed, replace it with a system under which depreciation rates are determined by reference to the effective life of the plant or equipment.

Legislation by press release

Schedule 1, item 11; Schedule 2 subitem 23(1); Schedule 3, item 14; Schedule 4, item 12 and Schedule 5, item 6

Most of the provisions of this bill are to apply from 21 September 1999 – this being the date of a press release issued by the Treasurer. While the Committee's practice is to draw attention to examples of legislation by press release, on this occasion the time that has elapsed between the date of the announcement and the introduction of a bill to give effect to that announcement is commendably short.

In these circumstances, the Committee makes no further comment on these provisions.

Retrospective application

Schedule 2, items 17 and 18

Items 17 and 18 of Schedule 2 to this bill are to apply retrospectively from 27 February 1998. However, the Explanatory Memorandum points out that the amendments proposed by these items are consequential on Royal Assent to the Taxation Laws Amendment Bill (No 5) 1999. The Committee previously reported on restrospectivity in that bill in its Tenth Report of 1999.

In these circumstances, the Committee makes no further comment on these provisions.

New Business Tax System (Former Subsidiary Tax Imposition) Bill 1999

This bill was introduced into the House of Representatives on 21 October 1999 by the Treasurer. [Portfolio responsibility: Treasury]

One of a package of bills to implement the New Business Tax System, this bill proposes to impose a tax on certain members of a wholly-owned company group.

The Committee has no comment on this bill.

New Business Tax System (Income Tax Rates) Bill (No. 1) 1999

This bill was introduced into the House of Representatives on 21 October 1999 by the Treasurer. [Portfolio responsibility: Treasury]

One of a package of bills to implement the New Business Tax System, this bill proposes to reduce the company tax rate:

  • from 36 per cent to 34 per cent for 2000-2001; and
  • from 34 per cent to 30 per cent for 2001-2002 and subsequent years.

The Committee has no comment on this bill.

New Business Tax System (Integrity and Other Measures) Bill 1999

This bill was introduced into the House of Representatives on 21 October 1999 by the Treasurer. [Portfolio responsibility: Treasury]

One of a package of bills to implement the New Business Tax System, this bill proposes to amend the following Acts:

Income Tax Assessment Act 1997 and the Income Tax (Transitional Provisions) Act 1997 to:

  • include an amount in the assessable income of a taxpayer that disposes of an interest in leased plant or a lease of plant;
  • trigger a balancing charge for 100% subsidiaries of wholly-owned groups; and
  • where the balancing charge is triggered, make the subsidiary and all the companies that were members of the group immediately before the time the subsidiary was transferred, jointly and severally liable if the subsidiary does not pay tax arising from the balancing charge within six months of the due date for payment;

Income Tax Assessment Act 1997 and the Income Tax Assessment Act 1936 to:

  • deal with CGT value shifting that occurs where, broadly, a debt owed by one commonly owned company to another is forgiven; and
  • remove deduction limits on exploration and prospecting expenditure and allowable capital expenditure on mine development;

Income Tax Assessment Act 1997 to:

  • defer recognition of capital losses or deductions which would otherwise be realised in certain circumstances;
  • remedy defects in the continuity of ownership test, currently applying to tax losses, net capital losses and bad debts of a company, and proposed to apply to companies with unrealised net losses;
  • limit the extent of unrealised loss duplication by applying the same business test to company losses where there has been a substantial change in a company's ownership or control,
  • prevent indexation of the cost base of CGT assets acquired after the start time and freezes the indexation amount of the cost base of CGT assets acquired at or before the start time and disposed of after that time; and
  • provide a CGT discount to individuals, complying superannuation entities and trusts;

Income Tax Assessment Act 1997, the Income Tax (Transitional Provisions) Act 1997, the Income Tax Assessment Act 1936 and the Financial Corporations (Transfers of Assets and Liabilities) Act 1993 to prevent the duplication of a tax loss or a net capital loss which has been transferred between wholly-owned group companies in certain circumstances; and

Income Tax Assessment Act 1936 to remove the “13 month rule” (which allows immediate deductions of prepayments for things to be done within 13 months) and spread the deduction over the period the prepayment occurs.

Legislation by press release

Subclause 2(2) and Schedule 5; Schedule 1, item 18 and Schedule 2, item 5

Some of the amendments proposed by this bill are to commence on 22 February 1999, or will apply from that date. The Explanatory Memorandum notes that this date was chosen because it was the date of the Treasurer's Review of Business Taxation Press Release No 4. The Explanatory Memorandum goes on to note that this was followed by a subsequent press release – No 58 of 21 September 1999.

The Committee has consistently drawn attention to the Senate Resolution of 8 November 1988, which deals with tax legislation and which provides that:

where the Government has announced, by press release, its intention to introduce a Bill to amend taxation law, and that Bill has not been introduced into the Parliament or made available by way of publication of a draft Bill within 6 calendar months after the date of that announcement, the Senate shall, subject to any further resolution, amend the bill to provide that the commencement date of the Bill shall be a date that is no earlier than either the date of introduction of the Bill into the Parliament or the date of publication of the draft Bill.

This bill has been introduced more than 6 months after the date of the Treasurer's press release. The Committee, therefore, seeks the Treasurer's advice as to the time taken in introducing this bill, and as to the effect of the Senate resolution on the proposed commencement date of the bill.

Pending the Treasurer's advice, the Committee draws Senators' attention to this provision, as it may be considered to trespass unduly on personal rights and liberties in breach of principle 1(a)(i) of the Committee's terms of reference.

Legislation by press release

Schedule 6, item 16; Schedule 7, Part 3; Schedule 8, item 10 and Schedule 9, items 14, 21, 30 and 32.

Many of the remaining amendments proposed by the bill are to commence on 21 September 1999. As noted above, this date has been chosen as it is the date of a second media release issued by the Treasurer. While it is the Committee's practice to draw attention to instances of legislation by press release, these provisions have been introduced well within the 6 month period required by the Senate Resolution of 8 November 1988.

In these circumstances, the Committee makes no further comment on these provisions.